If you are reopening the doors of your business as we ease out of lockdown you may be needing to fund your business.
Whether starting up or an established business, accessing extra cash maybe necessary for growth or new stock.
Many people may have already used their own money or tried the bank. Others prefer not to use bank loans, in which case there are often grants available. They can often differ depending where you live.
But if you have ruled any of those out, here are 5 other ways to fund your business.
The trendiest way of getting funding these days is through crowdfunding. Platforms such as Kickstarter and Indiegogo (there are many more) are great places to start. They boost small businesses and allow firms to pool small investments from several investors instead of seeking one larger investor. Just make sure you read the small print and do your research so you don’t get stung.
2. Venture capitalists
Venture capitalists are an outside group that takes part ownership of the company in exchange for capital. Basically, you sell a portion of your business in return for cash. Typically, percentages and fees are based on a company’s valuation, and of course you can negotiate. The beauty of venture capitalists is that you don’t just get money, you get expertise, knowledge and a pool of resources you might not be able to otherwise afford. But you are selling your soul so think long and hard before taking this route.
3. Angel investors
Whereas a venture capitalist is typically made up of a company buying part of another firm, angel investors are individuals who might take a particular fancy to your enterprise. Angel investors could take a back seat and just hand you some cash for a percentage of profits and shared ownership. Equally you might want to use their knowledge for some advice and guidance. Angel investment is personal and usually relational.
4. Personal financing
This sounds risky, but if you put your savings or even your mortgage on the line, then the only person you’ll have to answer to is you! Although you might not want to take this step, there’ll be no need to worry about giving away shares. The biggest consequences are that your holiday or dream car might have to wait.
5. Purchase order financing
Cash is king and many different things can affect your cash flow, especially at the moment. Sometimes, you can be in a situation where you’re unable to fulfil a large order due to a lack of funds to buy the materials needed to produce your goods. A purchase order financing organisation will extend an advance so you can buy your materials and then collect money once the goods are sold. It sounds perfect, but there are lots of clauses and fees you should be aware of, so once again, do your research.
No matter which you choose, like any funding be aware of the contract. Don’t sign up if you can’t afford repayments!
• If you need advice about funding your business, then contact our team to talk about your business finance.